LuLu IPO took guts

Have you had a look at LuLu? No, not the clothes worn by Yummy Mummies all over North America. The tech IPO.

Publishing, poetry, books, competing with Amazon, no Dan Brown, online books, early morning unknown authors in their housecoats…can you sell that to 75 mutual fund portfolio managers during a series of 35 minute roadshow presentations? Apparently that’s tough to do at this particular moment in time.

According to my friends at the DTM, Online book publisher LuLu pulled their initial public offering this week.

For months now, I’ve been opining that the Canadian tech IPO window was opening. And despite a valliant attempt by its lead underwritiers, the stock market isn’t ready — at least this week — to buy much of anything “new”. Whether it be tech or stuff-you-extract-from-the-ground (think Athabasca oil Sands), which is generally a guaranteed deal success on the resource laden Toronto Stock Exchange.

Apparently, Red Hat founder Robert Young’s successful track record wasn’t sufficient to get the deal over the finish line. At first glance, it might sound like a tough IPO to get done in the best of times, but any IPO filing takes guts. Both on the part of the management team, the company’s original investors, and the investment bankers, who only get paid if the deal succeeds.

What the LuLu means for Calgary’s Smart Technologies pending IPO is unclear. Two IPOs were priced in the U.S. last Thursday, and they were the only two that “got out” so far in April; one was small at US$30 million, and the other was much meatier size with ~US$230million raised. Both have traded down so far. 13 U.S. IPOs were priced in March, so the momentum isn’t great right now with but two pricings in the first half of April.

For Smart, the buzz remains particularly strong, with the rumoured IPO deal size growing to US$1 billion from US$400 in a few short months. That sounds like a blowout in the making. Let’s hope that buyers keep an open mind, and that pixie dust spills over to other rumoured IPO candidates, such as Canadian VC-backed Vixs, for example.

Remember the golden rule: a pulled IPO is not a failure for an entrepreneur. Failing in your business is a failure. A pulled IPO just means the market wasn’t there for you that week: which more often than not has little to do with your story, and much more to do with what else is going on (or isn’t) in the world of the capital markets at that particular point in time.

MRM